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UPDATE 1-Australian retail sales fall again in Sept, but outlook firm

* Sept m/m retail sales -1.5% vs -4% in Aug

* Sept qtr retail sales +6.8%, will likely add to GDP growth

* Sales expected to rise as Victoria eases restrictions (Recasts, adds economist comment, background)

SYDNEY, Oct 21 (Reuters) - Australian retail sales fell 1.5% in September from the month before, initial estimates showed, although a solid rise in quarterly sales on a year ago still augered well for an economy facing its worst downturn in a generation, analysts said.

Turnover in food retailing and household goods declined last month, although both sectors were trading at levels well above September 2019, preliminary data from the Australian Bureau of Statistics (ABS) showed on Wednesday.

The month-on-month fall in September follows a 4% decline in August, reflecting a second-wave coronavirus outbreak in the country’s second-largest state of Victoria that led to a strict lockdown.

Still, sales during the September quarter climbed a solid 6.8% from a year ago, which would add to gross domestic product growth for the period after subtracting 0.6 percentage points in the June quarter.

“The boost to retail spending has come from the income boost to households from government payments,” said AMP economist Diana Mousina.

The Australian government has spent hundreds of billions of dollars in wage subsidy schemes and welfare payments since mid-March as the A$2 trillion ($1.4 trillion) economy plunged into its first recession in three decades.

Australia’s central bank also slashed its cash rate to a record low 0.25%, launched an “unlimited” bond buying programme, initiated a cheap funding facility for banks and kept financial markets flush with liquidity to help keep borrowing costs low.

The Reserve Bank of Australia (RBA) is widely expected to further cut the cash rate to 0.1% at its Nov.3 meeting and expand its bond-buying programme to include long-dated debt.

“Lower retail spending over August and September reflects the drag from restrictions in Victoria,” Mousina added, referring to the coronavirus-induced strict lockdown in Australia’s second-most populous state.

Economists and retailers expect sales to increase in coming months, with Victoria easing its restrictions and as shoppers tend to spend more during Black Friday and Christmas sales.

The ABS will release the final estimate on Nov. 4. ($1 = 1.4150 Australian dollars) (Reporting by Swati Pandey Editing by Richard Pullin)

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